Retail Banking

1. PBS 204 – 4 Credits

2.  Unit 1 : Introduction to Retail Banking – Definition &
Concepts
 Unit 2: Retail Products
 Unit 4: Important Assets Products – Home Loans
 Unit 5: Personal Loans
 Unit 6 : Educational Loans
 Unit 7 : Credit Cards & Debit Cards
 Unit 8 : Third Party Products
 Unit 9: Axis Bank Products –CASA , FD , Life Insurance ,
General Insurance , Mutual Funds , Gold Investment Scheme ,
Gold Loans
 Unit 10 : Finacle Related Modules to Axis Bank Retail
Banking Products

3. Unit 1: Retail Banking Products

4.  1.1 Definition and History
 1.2 Roles With in The Bank
 1.3 Applicability of Retailing Concepts
 Advantage / Disadvantages,
 Opportunities, Challenges in Retail Banking;
 Functions of Retail Banking Branch;
 Types of Customers (Segments) and
 Types of Accounts
 1.4 Distinction between Retail & Corporate /
Wholesale Banking

5.  Banks are among the main participants of the
financial system in India.
 Banking in India originated in the last decade
of 18th century.

6.  There are three different phases in the
history of banking in India.
1. Pre Nationalization Era
2. Nationalizaton Stage
3. Post liberalization Era

7.  In India the business of banking and credit
was practiced even in very early time.
 The remittance of money through Hundies
was very popular

8.  Organizational Structure of banks in India
which includes following contents :
 RBI
 Commercial Banks
 Co-operative Banks
 Development Banks


9. 1. The RBI :-
 The RBI is the supreme monetary and banking authority in
country and has the responsibility to control the banking
system in country.
 RBI performs various functions like Controller of Credit ,Issue
of currency , lender of the last resort , Controller of liquidity
and Money Supply , Banker`s to Bank .

10. 2. Public Sector Banks :-
 State Bank of India and its Associates
 Nationalized Banks
 RRBs

11. 3. Private Sector Banks :-
 Old generation private banks
 New generation Private banks

12. 4. Co-operative Sector banks :-
 State co-operative banks
 Central co-operative banks
 Primary agriculture credit societies
 Land development banks
 State land development banks

13. 5. Development Banks :-
 Industrial finance cooperation of india (IFCI)
 Industrial development bank of india (IDBI)
 Industrial investment bank of india (IIBI)
 Small industrial development bank of india
(SIDBI)
 National bank for Agriculture and Rural
Development (NABARD)
 Export import bank of india

14. After independence in 1955.the imperial Bank of
India was nationalized and established as the
State Bank of India.
 On 19th July 1969 the nationalization of 14 major
scheduled commercial banks each having deposit
worth 50 crores and above came into effect.
 Later the govt. nationalized six more commercial
private sector banks with deposit liability of not
less than RS. 200 crores on 15th April 1980.

15.  The quality of credit assets fell because of
liberal credit extension policy.
 Excessive political interference.
 Poor performance appraisal policy
 The credit facilities extended to the priority
sector at concessional rates.
 The high level of low yielding SLR
investments adversely affected the
profitability of the banks.
 The rapid branch expansion

16.  The need for restructuring the banking
industry in 1992.
 The reform process enhanced the
opportunities and challenges.
 The root causes for the lack luster
performance of banks are –
 Regulated interest rate structure
 Lack of focus on profitability
 Lack of the transparency in the bank’s
balance sheet.
 Lack of competition

17.  All over the world , there is a shift in the
economy from the manufacturing to the
service sector.
 Banking industries includes a number of
businesses such as corporate banking ,
investment banking , wealth management ,
capital market etc.
 Retail banking is another segment of banking
system. It is a typical mass- market banking
characterized by a large customer base and
large volume of transactions.

18.  Retail banking also known as Consumer Banking is the
provision of services by a bank to individual consumers, rather
than to companies, corporations or other banks.
 Services offered include savings and transactional accounts
, mortgages , personal loans , debit cards , and credit cards .
 The term is generally used to distinguish these banking services
from investment banking , commercial banking or wholesale
banking.
 It may also be used to refer to a division or department of a bank
dealing with retail customers.
 Technology has played an important role in streamlining
electronically in providing faster and accurate customer services .
 Various channels like ATMs , Kiosk , E Payment System like
cards , On line services , CTS , Mobile banking ,NEFT and NECS
are the nee banking paradigms

19.  In India, the retail banking scenario has been
the market changing from a seller’s market
to buyer’s market.
 Retail banks offer services like account
opening ,credit card , debit card , ATM ,
internet banking , phone banking, insurance ,
investment etc.
 Retail banking refers to dealing of
commercial banks with individual customers ,
both on liability and asset sides of the
balance sheet.

20.  1. BRANCH HEAD
 2. OPERATIONS
 3. SALES
 4. MARKETING / RM
 5. Business Development Executive / Officers
 6. Regional / Circle RMS

21. 1. Multiple Products :-
 Various types of deposits/accounts.
 Credit and debit cards
 Loans
 Insurance
 Mutual funds etc.

22. 2. Multiple channels of distribution
 Internet banking
 Mobile banking
 Call centers

23. 3. Multiple customer groups :-
 Individual customers
 Petty businesses
 Small and medium enterprises

24. 24

25.  A universal bank participates in many kinds of banking activities and is both
a commercial and an investment bank as well as providing other financial
services such as insurance.]
 These are also called full-service financial firms, although there can also be
full-service investment banks which provide wealth and asset management,
trading, underwriting, researching as well as financial advisory.
 A banking system in which banks provide a wide variety of financial services,
including both commercial and investment services.
 Universal banking started some European countries, including Switzerland. In
the United States, however, banks are required to separate their commercial
and investment banking services.
 Proponents of universal banking argue that it helps banks better diversify risk.
Detractors think dividing up banks' operations is a less risky strategy.
 But now in India also many banks have become universal banking as they are
selling and marketing various types of financial services at one point.
 Axis Bank ,ICICI Bank and HDFC banka re the examples of Universal
Banking system.

26. Narrow banking is a proposed type of bank called a narrow bank also
called a safe bank.
It is an antonym to Universal Banking .
Narrow banking would restrict banks to holding liquid and safe
government bonds.
Loans would be made by other financial intermediaries. That is, the deposit
taking and payment activities would be separated from financial
intermediation activities.
It is also called as Banking for limited purposes / Restricted banking .
Commercial Banking activities alone - no investment banking, Advisory,
consulting etc
There is a rarely asset liability mismatch Narrow banking would restrict banks to
holding liquid and safe government bonds. Loans would be made by other
financial intermediaries.
That is, the deposit taking and payment activities would be separated from financial
intermediation activities.
26

27.  Purported attributes of narrow banking include -
 1. no lending of deposits
2. extremely high liquidity
3. extremely high asset security
4. lower interest rates paid to depositors
5. regulatory framework with higher level of scrutiny
and operational and investing restrictions
 Additional criteria applied to safe banks include -
 1. no derivatives
2. no off balance sheet assets
3. high degree of institutional transparency (e.g.
continuous real-time disclosure of financial records)
4. capped executive salaries
5. low risk jurisdictions

28.  The financial intermediary involved in facilitating the creation of credit
across the global financial system but whose members are not subject to
regulatory oversight.
 The shadow banking system also refers to unregulated activities by
regulated institutions
 The shadow banking system has escaped regulation primarily because it
did not accept traditional bank deposits,
 As a result, many of the institutions and instruments were able to employ
higher market, credit and liquidity risks , and did not have capital
requirementslcommensurate with those risks.
 Subsequent to the sub prime meltdown in 2008, the activities of the
shadow banking system came under increasing scrutiny and regulations.
 Examples of intermediaries not subject to regulation include hedge funds,
unlisted derivatives and other unlisted instruments. Examples of
unregulated activities by regulated institutions

29.  Client based will be large and therefore risk is spread across the
customer base
 Customer loyalty will be strong and customers tend not to change from
one bank to another very often.
 Attractive interest spreads since spreads are wide , since customers are
too fragmented to bargain effectively .
 Credit Risk tends to be well diversified , as loan amounts are relatively
 There is a less volatility in demand and credit cycle from large
corporates.
 Large number of clients can facilitate marketing , mass selling and the
ability to categorise / select clients using scoring systems / data
mining.

30.  Problems in managing large numbers of clients ,
especially if IT systems are not sufficiently robust.
 Rapid evolution of products can lead to IT
complications.
 Cost of maintaining branch networks and handling
large numbers of low value transaction tend to be
relatively high.
 Higher delinquencies especially in unsecured retail
loans and credit cards receivables .

31. Opportunities

34.  Retention of Customers
 Rising Indebtedness
 Information technology plays both the role of
opportunity an challenge
 KYC and money laundering
 Cyber Crimes
 Outsourcing of financial services
 Customer Complaints and dissatisfaction


35.  1.Banking facilities targeted at individual customers
 2.Focussed towards mass market segment covering a large
population of individuals
 3.Offer different liability , asset and a pletheora of service
products to the individuals customers.
 4.The delivery model of retail banking is both physical and virtual
i.e services are extended through branches and also through
technology driven electronic off site delivery channel like ATMs ,
internet banking and mobile banking.
 5.Extended to small and medium size businesses.

37.  Current Account
 Savings Account
 Term Deposit
 Recurring Deposit
 Investment Prodcuts – Mutual Funds , life
Insurance and General Insurance
 Assets – Loan Account – Overdraft
 Business Loans account
 Forex Accounts
 NRE / NRO Accounts

38.  Future of Retail Banking is for the CUSTOMER so efficient customer
services , satisfaction and customer delight is a key to success.
 Pricing is determined by Customer.
 Competition among Banks would ensure him better service at cheaper
rate.
 Customer would be able to discount his future earnings as Retail Credit
for his higher standard of living.
 Sharing of information about the credit history of households is
extremely important .
 CIBIL incorporated in India in 2000 aims at fulfilling the needs of credit
granting institution for comprehensive credit information by collecting ,
collating and disseminating credit information pertaining to both
commercial and consumer banking.
 Finally , retail banking does not refer to lending only .In the whole story
of retailing one should not forget the role played by retail depositors.

39. Retail Banking
39

40. 40

41.  Retail banking is typically mass- market banking where individual
customers use local branches of larger commercial banks.
 Services offered include savings and checking accounts , mortgages ,
personal loans , debit cards , credit cards etc.
 There is a constant need of constant innovation in retail banking.
 Product development differentiation , innovation and business process
reengineering , micro planning , marketing , cost reduction and electronic
banking , technolgoical up grdation – New Banking Paradigms.